A new report has outlined those factors that have driven success in the energy drinks sector pioneered by Red Bull in 1987.
The report, The 10 Key Factors for Success in Energy Drinks - Europe and the US, published by The Centre for Food & Health Studies, highlights areas that define success in the category including:
- A benefit that the consumer can feel
- Focus on one benefit
- Focus on one brand
- Lifestyle marketing
- Packaging innovation
- Innovation in distribution
- Premium pricing
- Asian innovation
The energy drinks market is one of the out-and-out success stories of the functional food revolution that began in Japan in the 1950s when a Japanese scientist named Dr Minoru Shirota launched Yakult, widely regarded as the world's first probiotic drink and functional beverage.
IRI figures for the US show Red Bull has 42.3 per cent of the market followed by two of the few successful me-too start-ups, Monster (Hansen Natural), with 16.71 per cent and Rockstar (11.82 per cent). Other brands make up the remaining 29.34 per cent.
The US energy drink market reached €3.7bn in 2006, according to Packaged Facts which predicted it will grow to €6.3bn by 2011. Zenith International put the European market at €3.1bn in 2006.
The sector has benefited from widespread energy deficits and the relative ease with which selected stimulant ingredients such as caffeine, guarana and taurine can be incorporated into products.
Raging Red Bull
Report author, Julian Mellentin, saves special praise for Red Bull, a brand that has risen to be one of the most globally recognised in little more than 20 years.
Aside from clever marketing (a singular strap-line "Red Bull gives you wings"), branding (clear and simple), distribution (initially avoided supermarkets, which still only account for 30 per cent of its sales) and packaging (the slim-line can), one of the key factors behind the success of Red Bull and other leading brands is the fact they do what they say on the tin, namely providing an energy boost.
"Energy drinks, like all the best performing functional foods, deliver a benefit that is immediately effective and detectable," writes Mellentin. "Red Bull made the energy benefit its primary selling point."
He notes this efficacious, well-marketed product has achieved its phenomenal success worldwide (60 per cent market share in Europe and the US and global sales of about €2.64bn in 2006) by answering a genuine consumer trend that has grown in recent decades - a lack of energy.
"And it is not only young clubbers who feel they need a shot of energy: again and again consumer research fingers 'lack of energy' as a key consumer interest - for stressed executives trying to stay on top of their responsibilities, for harassed and time-pressed mothers, for older people who want to stay active - in fact for anyone struggling to get through a sleepy afternoon in the office," he writes.
"Feeling energetic is one of the most basic self-descriptions of wellness in health psychology...Moreover, having energy, like good digestive health, is a 'wellness' issue, not (like cholesterol-lowering products) a 'death and disease' issue."
Its success in these areas has allowed Red Bull to charge healthy premiums although these have been eroded since 2000 as an increasing supermarket presence, at least in the UK, brought diminished margins.
In such outlets, its per-litre retail price has fallen from about €9 to €4 which, Mellentin notes, still far exceeds the per litre pricing of a product like Coca-Cola.
Against the odds
He also notes how the energy drink category has succeeded despite being dismissed by almost all sections of the beverage industry and major players such as PepsiCo and Coca-Cola who saw it as little more than a fad. By the time they tried to get involved it was too late.
"The rules of the category were established and, as a result, late-comer energy brands were doomed to become poorly performing me-toos in the market."
Mellentin also highlights areas of innovation going forward including natural energy, the women's market, the men's market, and mood and brain benefits.